Google shares fall below $500 to nine-month low

Analysts say downward pressure on the stock reflects a weighty combination of concerns.

This week Oracle made it official that it's seeking billions of dollars in damages from the Internet search giant in a patent and copyright infringement case in San Francisco federal court involving Google's Android software that it licenses to mobile device makers.

Search engine marketers also warned that paid search spending this quarter may not be as robust as anticipated. Already, investors are bracing themselves for Google to put its rip-roaring growth days behind it even though its annual growth rate of about 15% still outpaces the overall market.

Some investors are even concerned about growth in smartphones after the BlackBerry smartphone maker Research In Motion said quarterly revenue may drop for the first time in nine years and announced plans to slash jobs.

Add to that the heigtened regulatory scrutiny with word leaking Friday that the U.S. Justice Department will review Google's proposed $400-million purchase of online advertising company Admeld to determine if it would harm competition.

And Wall Street is still not entirely sure what to make of the leadership of Google co-founder Larry Page, who took over for longtime CEO Eric Schmidt in April. Page reassured some investors with his remarks at the Mountain View company's annual shareholder meeting, but they remain uneasy about Google's unprecedented hiring and spending spree as it doubles down on research and development.

"All those things combined with an uncertain economic and market backdrop, you have the feeling that the stock is in quicksand," said Standard & Poor's analyst Scott Kessler.

It has fallen more than 15% so far this year.

Still, Google is the undisputed leader in the lucrative business of online search. It has nearly $37 billion in cash. Facebook and a new generation of social networking companies may be getting a bigger share of advertising dollars, but those dollars are not coming out of advertisers' search budgets, according to the analysts at ThinkEquity. Google has some promising new ways it could make money from its Android mobile software and display advertising.

"The June quarter is usually Google's weakest of the year," he explained.

Analysts are remaining reasonably bullish. In fact, ThinkEquity has a price target of $675 a share.

"We remain comfortable with our recently lowered Google estimates and maintain a positive outlook on shares over the next 12 months, though we expect shares to remain range bound near term," ThinkEquity analyst Aaron Kessler wrote in a report Friday.